HF
3128

A47

1979

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402

Stock Number 003-009-00317-2

Introduction

U.S. Policy

The United States officially recognized the People's Republic of China (PRC) on January 1, 1979. The status of the U.S. Liaison Office in Beijing (Peking) and the PRC Liaison Office in Washington is to be raised to that of an embassy on March 1, 1979.

This action by the two countries was the culmination of an effort set in motion by President Nixon's trip to China in February 1972. The Shanghai Communique issued on February 28, 1972, signified a dramatic shift in SinoAmerican affairs, ending the near absence of relations with the Mainland that dated back to before the Korean War. As a result, liaison offices were opened in the respective capitals in May 1973, the National Council for U.S.China Trade was formed, and trade between the United States and China began to expand. It is the policy of the U.S. Government to promote trade in nonstrategic goods with the PRC.

Although trade in 1978 exceeded $1 billion, unresolved trade and commercial issues continue to hamper its growth.* Neither country enjoys most-favored-nation (MFN) tariff treatment, and China does not have access to ExportImport Bank loans and guarantees and other financial programs of the U.S. Government, except for CCC (Commodity Credit Corporation) agricultural credits. The unresolved claims and assets issue inhibits or precludes direct banking relationships, direct shipping or airline connections in flag carriers, and the exchange of trade exhibitions. It is the policy of the U.S. Government to seek resolution of these and other barriers to the full development of trade and commercial relations.

PRC Foreign Trade Policy

Its leaders view international trade as an important factor in transforming China into a modern industrial state, as well as an instrument to foster the overall political and economic goals of making China a strong unified nation capable of exercising leadership in Asia and the world. Import policy is directed at the acquisition of capital goods that embody the modern technology needed to develop China's industry. Trade also is used to overcome serious shortcomings and bottlenecks in domestic production.

Appendix 1 lists U.S. domestic exports to China for JanuaryNovember 1978, and Appendix 2 lists U.S. general imports from China for the same period.

A NOTE ON PINYIN

On January 1, 1979, China adopted officially the "pinyin" system of writing Chinese characters in the Latin alphabet. A system of romanization invented by the Chinese, pinyin has been widely used for years in China on street signs and commercial establishment signs, as well as in elementary Chinese textbooks as an aid in learning the Chinese characters. Now pinyin is to replace the familiar Wade-Giles romanization system even in China's English language publications destined for foreign distribution. Therefore, pinyin is used throughout this report, giving the Wade-Giles romanization in parentheses after the first occurrence of each pinyin expression. Some words frequently used in this report are given below in Wade-Giles and pinyin.

A prevailing theme in PRC foreign trade policy has been economic independence. Until recently, China has avoided long-term foreign credit, preferring to scale imports to the amount of foreign exchange available from export earnings. However, the goal to thoroughly modernize China by the year 2000 and the objectives of the Ten-Year Plan (1976-85) are so ambitious that China has found it necessary to rely on some foreign financing. Until recently the PRC had attempted to become self-sufficient through development of its own productive capacity; now it realizes that the industrialization program can not be successfully completed in the desired time period without a major infusion of foreign plant, equipment, and technology. Generally, the PRC seeks to avoid becoming too dependent on any one country as a source of trade.

Development of foreign trade and economic relations with most nations of the world is an important part of China's present policy to maximize the potential contribution of foreign trade to economic development. China now has trading relations with more than 150 countries. To date China has joined very few international economic or financial organizations, but Beijing's interest in arrangements that promote trade should increase as the country becomes more involved in international commerce.